June 25, 2020 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings reflect Soneri Bank's maintained business profile as reflected by intact system share (end-Dec19: 1.8%, end-Dec18: 1.8%). The bank's funding base comprise of deposits and borrowings. Mark-up Income witnessed jump attributable to hike in asset yield and higher earning asset on a period on period basis. The net revenue witnessed marginal increase where fee commission inched up whilst loss on securities was recorded. Core Spread also witnessed uptick (end-Dec19: 4.4%; end- Dec18: 3.2%).

Sustainability in NIMR and non-mark-up income, continued enhancement in non-fund-based exposure is important for future years. SNBL's customer deposits observed growth of 11.4% consequently, CASA ratio witnessed meagre growth (CY19: ~63%; CY18: ~61%); where deposits remained tilted towards saving. Going forward deposit mobilization remains critical. Absolute NPLs declined which led to improvement in impairment ratio (CY19: 5.1%; CY18: 5.8%). Covid-19 has posed challenges to all segments of the economy, worldwide and domestically, most sectors are getting negatively impacted.

The ramifications would continue to unfold, warranting vigilance and timely actions where needed. The central bank has taken well-tailored and comprehensive actions including reduction in key policy rates (~525bps down since January 2020) and deferment of repayment obligations for a defined period. While reduction in interest rates would determine the bank's profitability, these measures have cushioned the allied risks surrounding the credit exposures.

The Investment book has expanded significantly and fuelled by borrowings from financial institution. Going forward, the strategy is to strengthen the existing good relationships. The bank's CET-I stands at 13.4% as at end-Dec19. Total CAR stands at 15.8%. The bank has issued additional Tier-1 TFC (PKR 4, 000mln) in CY18, which enhanced its capital base, thereby boosting its lending capacity.

The rating is a function of bank's ability to maintain its market position in the banking industry while strengthening its overall risk profile. Bringing efficiency in operational structure is important for long term growth. In the comparative landscape, adding granularity to deposits and advances is critical. Meanwhile, a sustainable increase in system share and consequent profitability would be ratings positive.

For more information, contact:AnalystThe Pakistan Credit Rating Agency Limited (PACRA)Awami Complex, FB1, Usman Block New Garden Town,Lahore - PakistanTel: +9242 586 9504 -6Fax: +9242 583 0425Email: hammad.rashid@pacra.comWeb: www.pacra.com

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